Washington State Loan Originator Licensing Update

2007 is a transition year for loan originators who work for a mortgage broker in Washington State.  These folks have received an interim license with a Dec 31, 2007 expiration date.  The license is conditioned upon LOs passing a competency exam, completing two continuing education courses (one of which must be an ethics course), paying the required annual fee, and completing their required renewal paperwork by Dec 31, 2007.

If loan originators complete their two required CE classes and pass the exam by Dec 31, 2007 but fail to renew with their state regulator, LOs will have 45 days to complete the renewal paperwork with DFI and will be assessed a 50% fine for completing the paperwork late.

[photopress:LOTest.jpg,thumb,alignright]If a loan originator does not complete the required two CE classes and pass the exam by Dec 31 2007, the LO must cease originating loans and transfer all files to his or her broker or another licensed loan originator.  The LO will have 45 days to pass the exam and complete the required CE classes while originating NO loans. After Feb 14, 2008, if the LO has not passed the exam and completed their CE, the interim license will expire and the LO will need to start the application process all over again from the beginning. After Feb 14, 2008, LOs must wait until their new license arrives from DFI before being able to do the job of, and earning fees from loan origination. There are no exceptions; not even one loan.

The consequences of not completing the continuing education and passing the competency exam by Dec 31, 2007 are not pleasant.  Read more about license renewal from the state rules.  (Scroll down to numbers 18 through 22.)

DFI is reporting (link opens pdf) 11,114 interim-licensed loan originators in Washington State with an additional 3956 applications pending for a total of 15,070 loan originators. So far, only an estimated 2000 loan originators have taken their competency exam. That leaves 13,070 who still must pass their exam by Dec 31, 2007 if they want to avoid paying the 50% penalty.

If we remove the 1833 LOs who originate Washington state loans from out of state, then we’re left with 11,664 originators who are physically located in WA State. Promissor, the vendor delivering the exam, shows seven exam sites located around Washington State. We have 46 test-taking days left in 07.  Theoretically, if 254 LOs took the exam every day (36+ LOs per test site) they could all make the deadline.  The real question, is: will they do it?   One of my students called me yesterday to report that she passed her exam, but that there were only 3 other LOs taking the exam along with her.

The pass rate is reportedly 89%.  To me, this means the test is too easy, so why the delay? Are LOs just behaving like stereotypical sales people and putting it off until the last minute? Are folks not concerned about the 50% penalty and they’re going to put it off until January and February? Are we in for some mass attrition?

Realtors: If you refer consumers to a loan originator who works for a mortgage broker, inquire about the status of the LO’s interim license. You don’t want your client’s loan file to be transferred to another originator mid-stream.

16 thoughts on “Washington State Loan Originator Licensing Update

  1. Jillayne, I think some will leave the mortgage broker they are employed at and become mortgage bankers…others will leave the industry…and yes, some will put this off until the last minute.

    I’m glad I passed my exam and it’s out of the way! 🙂

  2. I also agree with Rhonda. Sadly, the mortgage industry was begining to turn into a used car lot. Customers being mislead, lied to, or caught in a bait and switch sales pitch (hint hint; Ameriquest) is not something this industry should be any part of.

  3. I was at a holiday party this weekend chatting with a mortgage banker about the state of our industry. He’s a sales manager for a large local bank that provides mortgages (one of the better ones in my opinion). Anyhow, I asked him if recruiting was easier these days with mortgage brokers not passing their exams and he said it’s not. He’s having LOs who did not pass the background check contact him for employment and not disclosing what ever happened to cause DFI to reject them as a LO working for a mortgage broker. This sales manager told me that a simple google of the LO’s name revealed plenty, including DFI’s rejection.

    Who knows where these rejected mortgage broker LOs will go.

    I do think many will just not take the exam. I have a co-worker who did average production and just couldn’t pass the fingerprint. (I was rejected 3 times for fine prints too and it is frustrating). Combine that with a tough market…she doesn’t want to hassle with the exam and/or fingerprints. She’s giving up and going back to her previous career prior to being a LO.

  4. I am just coming into this and then all the changes made me wonder if it was worth going forward with it. I

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